| Page 2 of 2 < |
Beware of Builders Bearing Gifts and Pushing Lenders
(By Istockphoto)
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
Indeed, as long as the loans they offer are truly competitive with what you can get outside the showroom, applying for a mortgage with the approved lender could be the way to go. One of the reasons builders have these arrangements is so a lending snafu won't delay the closing.
"They want control of us," said Stuart Tyrie, a vice president with Wells Fargo Home Mortgage, one of the largest new-home lenders in the country. Among the local builders with whom Wells Fargo has preferred status are Winchester Homes, Craftstar Homes, and Miller and Smith.
Lenders who specialize in new-home loans are used to dealing with the uncertain timetables associated with construction. On average, nine months pass between the loan application and delivery of the finished home, according to Tyrie. With a new condo building, that time could stretch well past a year, as developers often delay the start of construction until they have sold a given number of units. What if interest rates blip up to a level you cannot afford? For a fee, Wells Fargo allows borrowers to lock in their interest rate for as long as two years, awaiting delivery of their new home. (Other lenders who cater to the new construction market offer similar deals.) That kind of interest-rate protection is an important benefit if you have a contract to buy a property with an uncertain delivery date.
Get actual rate quotes from a couple of lenders, and compare the types of loans they offer -- before you tour model homes.
"A borrower needs to get a good faith estimate" or a nonbinding list of closing costs "from a lender outside of the builder's relationship and make sure the program the builder is offering is in their long-term interest versus over the short term," said Mike Bradshaw, the executive in charge of Bank of America's partnering activities with builders and real estate brokers.
And if you can find a better mortgage deal outside the builder's showroom, try to negotiate with the builder to give you those incentives anyway. If you have a rock-solid loan approval in hand and you're a ready and willing buyer proven to have enough money to swing the deal, a builder could find that to be an offer he cannot refuse.
E-mail Elizabeth Razzi atrazzie@washpost.com.
